A sell-off in shares of AI suppliers on Tuesday is the strongest sign yet that sentiment on the trade of the decade is shifting, as worries grow that rising interest rates could derail a spending spree bigger than America’s historic railway boom.
In the nearly four years since OpenAI launched ChatGPT, money has poured into semiconductor companies, data centre owners, cable makers and anyone else earning revenue from an unprecedented race to build computing infrastructure.
Cracks in those bets, which began to appear in June, are now widening across markets: a data centre initial public offering collapsed in Australia last week, and credit investors are becoming choosy about AI debt.
In Asia, selling of South Korean chip-maker shares extended into a fifth straight day on Tuesday and accelerated sharply. The Kospi index fell more than 6%, while in Tokyo memory maker Kioxia led AI-related losses with a 13% drop.
The falls are the heaviest since the same kinds of stocks collapsed at the end of July. The Kospi is on its longest losing streak in more than two years and is down a quarter from its July highs, while Shanghai’s tech-focused Star Market has lost more than a third from its July peaks.
“The most important development has been not just bond yields going up, but the volatility for bonds … and that’s starting to work its way out through asset pricing across the board,” said Damien Boey, portfolio strategist at Wilson Asset Management in Sydney.
“It’s a very uncomfortable situation on many fronts… Maybe AI capex just comes off the boil a little bit, and maybe a few players are casualties in that.”
Heavy selling
The Philadelphia semiconductor index, the US benchmark, fell 2.7% on Monday, and even heavier selling drove Seoul-listed Samsung Electronics and SK Hynix down 10% and 8%, respectively. Samsung’s slide comes days after it forecast a record US$80-billion quarterly operating profit on the back of the global memory chip shortage.
On Monday, the research arm of BlackRock, the world’s biggest asset manager, downgraded its outlook for US stocks to neutral, citing “potential volatility around the AI buildout”, and turned bullish on short-term US treasuries.
“The consequences of an AI correction could be global,” the International Monetary Fund (IMF) warned on Tuesday in its latest global financial stability report – a day after its MD, Kristalina Georgieva, said AI investment was keeping world growth at about 3%. The IMF acknowledged AI’s contribution to growth but said there was growing evidence that capability investments and economic gains may not be as big as expected.
Caution is also spreading through primary markets. Last week Firmus, an Nvidia-backed Australian data centre operator, shelved a $5-billion IPO as investor interest dried up, underscoring how quickly risk has become the main focus for investors allocating capital to the sector.
Tencent Holdings’ sale of US dollar and “dim sum” bonds – debt denominated in Chinese yuan and issued in Hong Kong – on Tuesday was the latest deal to come under scrutiny in debt markets. Guidance for its 10-year dollar notes was about 1.15 percentage points above US treasury yields, which stand at 5.2%.
Last month, Japanese tech investor SoftBank sold the biggest high-yield bond deal on record, offering as much as 9.75% on $4.5-billion it raised with a term of seven-and-a-half years.
The change in mood dominated a string of top financial conferences in Singapore, most recently on Monday, when Broadcom’s CEO said capital was the biggest constraint on growth.
Few are calling time on the AI trade altogether – Meta’s shares jumped 3.4% on Monday after it released a new AI model – but many see semiconductors as a warning sign.
Marc Velan, head of investments at Lucerne Asset Management in Singapore, said the “brutal session” in Korea said more about positioning and the cost of capital than about any fundamental deterioration in AI demand.
“I suspect we’re entering the next phase of the AI cycle, where markets increasingly focus on monetisation and returns on invested capital – I wouldn’t call this the end of the AI trade,” Velan said. “But Korea could be an early warning of a broader shakeout.” — Tom Westbrook, © 2026 Reuters
